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Forecasting tool aims to make budgets a breeze
By Yoke Har Lee

An Auckland accountant and a former client, frustrated with the difficulties of financial forecasting, decided to make a difference.

A lack of cashflow management know-how means small to medium-sized business managers spend too much time on crisis management.

Auckland-based Kerry Finnigan ought to know. He was chief accountant for a large corporation and spent 30 years in accountancy and consultancy work.

This observation has prompted him to develop a financial forecasting management control tool, running on Microsoft's Excel spreadsheet.

He and project partner John Fredatovich, once a client of Mr Finnigan's, are finding a steady niche for themselves in a market dominated by many financial management tools.

Total Projections (TP), is designed to make budget forecasting a breeze.

It provides a way for accountants, business owners and managers to integrate three key financial components - profits, cashflow and balance sheet - in a seamless manner to present an up-to-date document.

Mr Finnigan said budget preparations are now almost outdated within a month. To prepare a new forecast, accountants or managers need to restart the whole process because there is no way to combine the historical data with the rest of the budget period.

Further, financial ratios - key determinants of a company's financial strength - are not prepared until year end. TP does that. It combines actuals with existing projections or, if circumstances dictate, with revised projections.

Are there any competing systems in the market? "There are different systems that claim to do that. We looked around for one such as ours. We believe the market doesn't have the product. If there is one, the marketing is not its job because we couldn't find it," Mr Finnigan said.

The idea of keeping up-to-date budgets probably isn't new. However, the integrated approach and the simplicity of the tool is.

But getting the product accepted has been one of the toughest tasks for the duo.

Mr Finnigan and Mr Fredatovich tried to get the banks to support the system but were told that banks could not influence clients' decisions on what tools they used to prepare their accounts.

But Mr Finnigan said that although banks ought not to be telling borrowers how to run their books, with better financial information, banks would be able to better monitor clients' performance.

Businesspeople also should not be too caught in the profit trap, Mr Finnigan said.

"Profit is king, they say. But I think cash is king. If a small company with a $500,000 turnover gets an order worth a few million dollars, it would very soon find out that while it was busy making and selling the goods, three months into that it would be in trouble because it didn't have any cashflow.

"Profit reports don't tell you anything about cashflow. You start off with a budget and after one month, the figure is wrong anyway. So you start all over. Companies that are smart have cashflow projections. But you can't have too much cash either, or you will be overcapitalised."

Total Projections operates under Finnigan Management Services, founded by Mr Finnigan. He started developing the idea when consulting for clients and found it hard to work with existing tools.

"All things are ultimately tied to the budget. I found it increasingly difficult to do the work properly. I found out from my son about Excel and saw the opportunity to integrate all the information."

Marketing the product was the next big task. Telemarketing worked for a while, but Mr Finnigan felt it was a slow process. He was now turning to newspapers and aiming at specific industries.

"I must admit we haven't got the right marketing tool yet. I know the product is right, but have not been able to get the message across to small and medium-sized businesses to accept that they need this financial forecasting tool, to convince them of the need for integration."

It costs $1200 to install the product but bigger companies may need to spend more for specific details. So far, 50 have been sold but Mr Finnigan hopes to sell 1000 per year.

"We have only been really going for six months with the product. Once we get the New Zealand market established, we will tackle Australia."

There is one user in Australia, following a recommendation by an associate of Mr Finnigan's. The Australian company, with turnover of more than $A10 million, was so impressed with the product, the chief executive wrote to tell Mr Finnigan the money spent had been recouped.

Word of mouth has also been helping to promote the product, Mr Fredatovich added.

Mr Finnigan said that at the end of the day, the system would make huge inroads only if accountants and small businesses changed their mindset.

One potential client had been amazed at the tool's simplicity. "The client said if it was so simple it can't be true. That is the scariest thing - people can't believe it can be good because it is too simple."

But Mr Finnigan was not afraid of the product being copied. "I am not scared of competition. If there are four new systems out there, all the better. There will still be a lot of work for the five of us to do. Competition is healthy for the market."

Pictured: Kerry Finnigan, right, and John Fredatovich. HERALD PICTURE / RUSSELL SMITH